Manufacturing firm sees business picking up but inflation risks remaining

D&L Industries | D&L Industries website

MANILA, Philippines—D&L Industries Inc., a food and plastics manufacturing giant whose products are found across restaurant chains and consumer goods, sees business picking up this year with the revival of economic activity but risks from surging inflation remaining.

“In the short-term, it looks like the increased demand is having a bigger positive impact than the negative impact of higher costs,” D&L president and CEO Alvin Lao told reporters on Wednesday (March 30).

The company disclosed that full-year 2021 sales surged 42 percent to P30.85 billion while net income jumped 31 percent to P2.64 billion as it recovered in the second year of the pandemic.

But higher commodity costs are eating into profits as D&L exceeded pre-pandemic earnings in 2021. Profit margins last year dropped to 14.8 percent from 18.4 percent as prices of key raw materials, like coconut and palm oil, rallied last year.

Lao said margins will “go back to what they were” once prices stabilized.

He also declined to provide specific forecasts for 2022, admitting that earlier assumptions had to be abandoned due to the uncertain environment, which included the Russia-Ukraine war.

“While Russia and Ukraine are not a significant part of our supplier or customer base, the ongoing conflict poses a threat to global recovery and has sent prices of key commodities skyrocketing over a short span of time,” Lao said in a separate statement.

Nevertheless, he said there was mounting evidence that critical business segments would ramp up with increased spending alongside the boost provided by the 2022 elections.

“We have pent-up demand. So revenge travel, revenge spending looks like it’s real,” Lao said, pointing to restaurants that have exceeded pre-pandemic volumes.

“It’s not just the recovery of dine-in but takeaways. The deliveries added to their business during COVID and it looks like this is continuing,” he added.

Food ingredients accounted for a third of D&L’s profits last year. Other major contributors were the Chemrez Group and speciality plastics, briefing materials from the company showed.

D&L remains on track to increase exports to 50 percent of revenues with help of a P9.1 billion manufacturing plant in Batangas, which will start commercial operations in January 2023. D&L said exports accounted for 33 percent of revenues last year.

TSB